On 3 March 2023 the Local Pension Committee approved Leicestershire County Council’s Pension Fund’s first Net Zero Climate Strategy.
The Strategy identifies that climate change is a material risk both to wider society and the £5.5 billion Pension Fund which must pay the pensions of over 100,000 scheme members on behalf of over 200 employers. Through the outcome of the Fund’s consultation, we saw our scheme members and employers’ support the proposed path to becoming carbon neutral, in a way that is managed prudently so that the Fund’s financial returns are kept at the right level.
The Strategy commits the Fund to becoming net zero by 2050, with an ambition for sooner in line with the Paris Agreement goals to limit global temperature well below 2°C, with the aim of achieving a 1.5°C limit. This is supported by the interim target to halve the carbon intensity of the Fund’s measurable investments by 2030. This will be supported through a number of targets and measures including:
- Decreasing the Fund’s exposure to fossil fuel reserves and increasing exposure to climate solutions, such as renewable energy, and technology related to the transition to net zero.
- Supporting real-world emissions reduction through an active engagement programme targeting companies contributing the most to the Fund’s climate metrics.
The Fund has already invested over £1 billion in funds that look to correlate climate change considerations with positive financial performance. These include:
- £872 million in LGPS Central’s All World Equity Climate Multi Factor fund. Which favours investment in companies that are taking a proactive approach to environmental factors.
- £55 million committed to global sustainably managed timberland with Stafford Capital. 65% of which is invested in planting new forests, 15% reforestation and 20% improved forest management. This will provide a source of sustainable low carbon timberland materials and generates verified carbon offsets. This new investment is in addition to the £139 million already held in timberland funds.
- £55 million committed to the Quinbrook Net Zero Power Fund. That invests in solar power with battery systems, both as part of the decarbonisation of the energy system, and as part of demand from data centres.
We are seeing these actions already directly impact the carbon metrics the Fund already measures. And, as of 31 March 2022 the carbon intensity of the equity portfolio has decreased by 26% since December 2019.
Despite the progress we have already made, the path is not entirely clear. The Fund’s approach will continue to be developed in light of changes nationally and internationally, recognising all governments, industries, companies, financial institutions, markets and individuals must act together with a common goal to shift towards a net-zero emissions world.in line with the Paris Agreement. The Fund’s approach must be managed carefully, and not lose sight of its primary purpose of ensuring the financial sustainability of the Fund for its members.
Further information on the Fund’s Net Zero Climate Strategy, implementation plan and investment approach can be found on our investments pages.
